This is a blog that I started in october 2010, mainly for discussing my ideas on the economy, taxation and politics. Please add comments - I'll do my best to reply. If you are new, I would recommend watching one of my YouTube presentations (in French or English). You can download a fully indexed pdf version (over 600 pages) here.

3 Dec 2011

FTTs and Credit Cards again

I was recently moaning about the fact that banks charge me a Financial Transaction Tax of around 2% whenever I pay for anything in a foreign currency - a charge that is in addition to the 2-3% merchant fees, and any differentials due to fluctuations in exchange rate.

I was recently offered a wonderful Air France - American Express credit card. So, I asked them whether it was good for people doing a lot of foreign travel. In other words, what additional charges are there for paying in a foreign currency? The answer - we charge the same 2% fee charged by other credit card companies.

So, I asked myself whether there is some sort of obligation for credit card companies to charge 2% on foreign transactions. There's an interesting site that compares the features of 234 different credit cards that are available in the UK. If you click on "Advanced Search", you can activate the "International Charges" feature. You can then sort using the International Charges field, which reveals that of the 234 cards on offer, most will charge you a 2.99% FTT for multiplying the foreign currency value by the current exchange rate, 33 will charge you 2.95%, 1 charges 2.5% and 2 will charge you 2%. In other words, UK banks are even worse than those in France. But, amazingly, there are 7 of the 234 cards that don't charge anything at all for paying in a foreign currency!

Some have other drawbacks. For example, the Halifax cards appear to charge 12.9% interest immediately after you have used the card (so by the time you get back from vacation, they will have already charged you anyway), and the Sainsbury's card charges interest at an extortionate 20.1%. I guess that I would recommend using the Saga Platinium card which only charges 11.9% interest but, unfortunately, it's only available for those over 50 years old. Others might go for the Post Office ones.

But there is no doubt about it. Banks are under absolutely no obligation to rip their customers off with charges of up to 2.99% just for doing a single multiplication.

This was confirmed by a colleague from the USA who showed me his JP Morgan Chase card (solid metal) that also charges no FTT at all on foreign currency payments.

Conclusion? We should campaign to force banks to drop these outrageous and totally unjustified FTTs. And if they don't, governments should not hesitate to apply the same 2-3% FTT rate to all the $4 trillion a day that the financial sector currently does for free. With 250 trading days a year, we can assume that foreign exchange transactions are currently around 1000 trillion dollars a year. 2% of than would be 20 trillion dollars - enough to solve the national debt problems of all the worlds governments in a couple of years.

There can surely be no justification for charging users 2.99% for a service that banks do for free. Until this aberration is eliminated, there can be no arguing that we are in this together.